It is easy to apply for small business funding when you know what to expect. Understanding the requirements and criteria when applying for a business loan will save you time and frustration. Regardless of if you are applying for funding through traditional banks or an online fintech lender, you need to be familiar with the lender’s requirements.
Why do you need business funding?
Carefully consider the reasons for applying for business funding. Many business owners find their applications rejected simply because they’ve applied for the incorrect type of finance. Start by understanding your business’s financial needs. Are you looking into equipment finance or expanding your business? Take a look at various financial institutions that offer the business funding you need, you may even find that some of them offer industry-specific funding that is tailored to your business needs.
So, how do you qualify for a business loan?
Business loan requirements ultimately depend on the lender. If you want to speed up the application process, you may need to speak directly to the funder about what sort of information they require. This could speed up the process of getting a response to your application.
Keep an eye on your credit score
Do you know our business creditworthiness? If you plan on taking out small business funding, your credit score is a good place to start. Lenders partly base their decisions on your credit rating. Once you submit your funding application, the lender will access your credit history from the credit bureaus. Your current level of debt and payment history may influence your credit score, therefore, a good credit rating makes for a good impression. To keep a good credit rating, you need to maintain a good repayment history on long-standing accounts. However, it’s important to bear in mind that not all lenders use the same lending criteria. Some fintech lenders use scoring technology to make an assessment and use several data sources to assess a business owner’s eligibility to receive funding.
How’s your collateral looking?
Lack of collateral is a common problem that a business owner faces when seeking a small business loan. Collateral is required by certain lenders who want to guarantee they will recover the funds if you are unable to pay back your business loan. Once you put up an asset as collateral, you’re giving the lender permission to claim that asset via the courts. But there’s still hope. Even if you don’t possess collateral, some funders offer unsecured business loans.
Business loan providers cite that time in business is a critical requirement. This might exclude business owners who have been operating for a number of years. However, fintech providers usually have less stringent requirements, as opposed to traditional lenders such as banks. Also bear in mind that most loan providers will have set minimum revenue requirements, but this differs from lender to lender.